Many companies are not aware that they are involved in R&D activities. However, according to the IRS rules and guidelines, (Sections 174 & 41), a company is performing R&D if they are involved in any of the following activities:

• Investigating or implementing a new process or significant improvements to existing processes -- for design, manufacturing, testing or quality control.
• Developing new products or making substantial improvements to existing ones.
• Struggling to solve technical problems related to new customer orders or changes in product application.
  

EXAMPLES: 

Food & Beverage:

This company is a manufacturer of bread crumbs and grated cheese products.  Recently the company initiated attempts to develop various types of water-soluble dry drink mixes. Following the implementation of a rigorous two-step internal research and development process, the company successfully resolved formulation, solubility, and packaging issues pertaining to a number of specific new mixes, including several organic drinks.

Net result:
Tax Credit (Federal and State) to the customer in excess of $100,901 (before adjustment for taxes).

Laminated Packaging Materials:

This company develops and manufactures a wide variety of printed flexible packaging materials. These products are most often used in form-fill-and-seal operations for consumer goods. Among other projects, the company sought to develop an alternative material to replace the aluminum foil used in the flexible packaging of many food products. The benefit of this approach would be to reduce packaging costs while continuing to maintain product freshness and the tactile qualities of existing packaging. The company carried out experimental trials involving two classes of plastic material.

Net result:
Tax Credit (Federal and State) to the customer in excess of $189,690 (before adjustment for taxes). 

Metal Working:

This company engineers and manufactures complex, machined components and systems including surgical implants, medical instruments, and power tools for medical applications. They set out to devise next-generation manufacturing techniques for a new three-component hip joint replacement system. The system in question was intended to offer orthopedic surgeons significantly greater flexibility in configuring replacement joints to suit the needs of individual patients. Extensive experimentation was carried out in an effort to establish optimized designs and machining procedures. During the same year, the company conducted research and development on a number of other products related to joint replacement.

Net result:
Tax Credit (Federal and State) to the customer in excess of $698,728 (before adjustment for taxes).

Automated Machinery:

This company designs, manufactures, and calibrates an extensive variety of custom-built, specialized machines including winders, perforators, automatic knife positioning machines, inspection machines and laminators.  The company set out to build a family of special machines for the manufacture of a new drywall finishing tape that would facilitate finishing of drywall seams at right angles. The project involved extensive experimental evaluation of various approaches to assembling the required vinyl and paper layers. Considerable uncertainty was associated with preventing a variety of wrinkling and other issues while achieving the throughput required to make manufacture of the product cost-effective. The machine eventually developed was one of several large systems built by the company during the same tax period.

Net result:
Tax Credit (Federal and State) to the customer in excess of $129,960 (before adjustment for taxes).

High Tech:

This company is a manufacturer of high-speed digital imaging systems.  As part of its ongoing effort to develop new and more powerful systems, the company was challenged to develop a next-generation microprocessor-based camera timing board that would afford a factor of five increase in data transfer rate from the camera’s memory to an external PC.

Net result:
Tax Credit (Federal and State) to the customer in excess of $344,144 (before adjustment for taxes).

Injection Molding:

As a manufacturer of injection molded products this company had a desire to develop product configurations and corresponding mold designs that would allow both reductions in the amount of plastic used per unit and the production of multiple units per molding cycle. A set of prototype aluminum molds would be required to be designed, built, experimentally evaluated, and modified as necessary.

Net result:
Tax credit (Federal and State) to the customer in excess of $385,260 (before adjustment for taxes).

Garment Manufacturing:

A garment maker involved in the production of uniforms needed to design the garment to certain specifications. The uniform had to meet certain product characteristics such as breathability, imperviousness, chemical resistance, and other physical properties.

Net result:
Tax credit (Federal and State) to the customer in excess of $266,322 (before adjustment for taxes).

Bio-Medical:

This manufacturer is a supplier of contract sterilization services for the treatment of medical instruments and consumables. R&D activities were initiated when they sought alternative chemicals to replace both ethylene oxide as a sterilant and methyl bromide as a fumigant.

Net result:
Tax credit (Federal and State) to the customer in excess of $401,675 (before adjustment for taxes).

Rubber Manufacturing:

This company is a developer and manufacturer of polymer-coated fabrics. Their task was to develop a new composite material that would be substantially less permeable and 50% stronger than an existing material. In addition, the new fabric had to offer superior weatherability and enhanced water shedding characteristics.

Net result:
Tax credit (Federal and State) to the customer in excess of $91,528 (before adjustment for taxes).

Medical Device Manufacturing:

An original equipment manufacturer (OEM) that develops and manufactures fiber optic laser devices for use in medical applications initiated R&D activities when they began development of a miniature, single-use optical device.

Net result:
Tax credit (Federal and State) to the customer in excess of $50,679 (before adjustment for taxes). 

Personal Care Products:

R&D work commenced for this company with the development and manufacture of various hair products which included permanent wave preparations, relaxers, texturizers, colorants, developers, color removers, and approximately 100 different formulations of powdered hair bleach.

Net result:
Tax credit (Federal and State) to the customer in excess of $121,359 (before adjustment for taxes).

Agriculture:

This company is a contract bog management and harvest business that conducts all phases of bog management for its clients, including planning, pruning, weeding, pest management, and sanding. Their task was to develop various types of equipment to achieve their goals and to improve the efficiency of their processes.

Net result:
Tax credit (Federal and State) to the customer in excess of $73,394 (before adjustment for taxes).